Determinant Factors in Disinflation Costs of Developing Countries

Abstract

This paper investigates some determinants of disinflation costs (sacrifice ratio) in some developing countries. The ratio is calculated by a SVAR model using annual data during 1985-2008 for 40 developing countries. The results show the ratio is decreasing in the status of high levels of initial inflation and central bank independence. Also, the openness of economy and capital mobility has positive effects on the ratio.

Keywords

• sacrifice ratio, disinflation costs, monetary policy, svar model, openness of the economy, capital mobility, central bank independence